The Democratic Corporation Remains a Distant Dream

Should shareholders have more sway in deciding who sits at this table? Should the table be expanded to seat each and every shareholder?

October 24, 2007 —

The Securities and Exchange Commission (SEC) is considering a series of measures designed to enhance the power small shareholders have in operation of a company. The reforms face stiff opposition from Wall Street and corporate boardrooms, who have long held that any democratic interference in the direct management of a firm threatens its bottom line.

So-called "shareholder activism" has been around for a long time. In the 1950s, the SEC rejected a request by Greyhound shareholders to submit a proposal to management that would end the segregated seating policy on buses in the South. Three years later, the SEC would officially bar investors from submitting any proposals that would interfere with the "ordinary business" of a company. The rule is used by corporations to this day to block shareholder influence.

Because shareholder activism has been so successfully kept at bay for so long, it's difficult to envision a day when employee shareholders could band together to prevent the outsourcing of their jobs or state pension funds could force a company to give health care to its workers. These ideas are revolutionary to some and apocalyptic to others.

But what if a day came where everyone who wanted to could buy shares of their favorite company and participate directly in its management? Would Chuck Taylor collectors have prevented the sale of the brand to Nike? Would Ford and Chevy devotees have guided the companies down a greener path in the early 90s, showing more foresight than the board members and CEOs? At this point one can only wonder.